Europe midday: Stocks rebound amid well-received earnings

European equities racked up healthy gains on Friday, rebounding from heavy losses in the previous session as investors cheered results from the likes of Commerzbank and Rolls-Royce.

At midday, the benchmark Stoxx Europe 600 index was up 1.8%, Germany’s DAX was 1.5% higher and France’s CAC 40 was up 1.1%.

“European markets are ready to recover some of the losses after being battered badly throughout this week,” said Naeem Aslam, chief market analyst at AvaTrade.

“Traders are thinking enough is enough and let's bag some bargains and this is despite the fact that we had a heavy selloff over in Asia.”

However, Aslam cautioned that it was too early to tell whether the downward spiral for the global equity market was coming to an. “The bounce which we may experience may not last for long, as investors are apprehensive about the banking sector due to the low interest rate environment and feeble growth.”

Meanwhile, oil prices were firmer, boosted by comments from Saudi Arabia’s energy minister, which fuelled hopes of a coordinated production cut by OPEC members.

West Texas Intermediate was up 3.8% at $27.20 a barrel while Brent crude was 3.9% higher at $31.24, helping to push the Stoxx 600 oil and gas index up 3.5%.

On the corporate front, shares in German lender Commerzbank surged 15% on Friday as it swung back to a profit in the fourth quarter and announced a dividend. The Stoxx 600 banks index added 3.5%.

Aerospace and defence group Rolls-Royce rocketed 17% in London despite halving its dividend, as it maintained its 2016 outlook and posted slightly better than expected underlying full year profits.

Renault reversed earlier gains to trade lower after reporting a 44% jump in annual profit that beat analysts’ expectations.

Also on Friday, investors were digesting some mixed Eurozone data.

According to a flash estimate from Eurostat, Eurozone GDP grew 0.3% in the fourth quarter, in line with the previous quarter and economists’ forecasts.

Compared with the same quarter of 2014, seasonally-adjusted GDP rose by 1.5%, also in line with expectations and a touch weaker than the 1.6% growth registered in the third quarter. For 2015 as a whole, GDP was up 1.5%.

“Despite an ever-increasing flood of external risks, today’s EU GDP figures show that the region continues to grow steadily,” said Dennis de Jong, managing director at UFX.com.

“Low oil prices and favourable financing conditions have provided optimism for business in the EU, in what seems like a persistent grapple with the global economy.

Industrial output figures were a lot gloomier, however, showing an unexpected decline in December as energy dragged.

Output was down 1% compared with a 0.5% drop in November and much weaker than the 0.3% increase forecast by economists.

Compared with December 2014, industrial production fell 1.3%, versus economists’ expectations for a 0.9% increase.

Still to come on the macroeconomic front, the US import price index and retail sales are at 1330 GMT. University of Michigan consumer confidence is at 1500 GMT, along with business inventories.